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Levels to watch: gold, silver and crude

Commodities are plumbing fresh lows this morning, with it looking increasingly likely that the sector will record a fourth annual decline. The ‘curate’s egg’ that is the global economy continues to make it difficult for the sector to stage a full rebound.

Silver ingots
Source: Bloomberg

Although we mainly discuss energies and precious metals, the supply situation in hard and soft commodities also points to a bearish situation. Corn output is at a record high according to the US Department of Agriculture, while US crude production is expected to hit a 45-year high next year, using data provided by the Energy Information Administration.

Gold could target $1255

Gold has started firmly below yesterday’s close, with an intermediate target being yesterday’s low at $1244, and then the next level to watch at $1240.

A modest oversold reading suggests a bounce may be in the offing, with a first target being $1255, and then the $1270 area.

The 50-hour moving average has done well to cap gains, limiting any upside to the area around $1252.

Silver still likely to test $18.75

Although reading as oversold on the daily chart, silver still looks likely to test $18.75, the major support over the past year, with the 50-day moving average crossing below the 200-DMA becoming a certainty in the coming days.

Any drop through here targets the 2013 lows around $18.20, while any move higher must manage a close above $19.05.

An oversold reading on the intraday chart suggests another bounce, but the 100-hour MA should cap gains around the $19 area.

Brent support around $96.55

There has been little respite for oil despite news of Saudi Arabia’s cut in production during August.

Support may now be found around $96.55, the low from 2013, while any short-term bounce will likely run into resistance around $100. Any gain to the upside should continue to be capped by the 20-DMA around $101.60.

$91.55 upside target for WTI

WTI is now through its lows for the year and is on its way to $91. Beyond that there may be some support at $88.25, while $91.55 is the primary target on the upside. 

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